At the end of your minimum term of contract, you upgrade as normal. The Desire isn’t taken into account at all. It’s almost as if you received a discount on a Pay As You Go phone as reward for being an existing customer

How To Get It

Ring 202 from your O2 phone

Press 2 to say you’re an existing customer

Press 2 to select Order/Upgrade options

Press 2 to select Upgrades

Ask the person you get put through to that you want to buy a HTC Desire

If they say that they can’t offer it to you say you know other people that were able to buy it for this price

If they ask if you want to be put through to upgrades, say yes, then repeat steps 5 and 6

FAQ

Can I get it on PAYG?
No, this deal is for contract customers only, even if you’re on a 1 month Simplicity deal

I’m being told that I need to be put on a 24 month deal, is that right?
No, tell them you want to keep your contract but just want to buy the phone

I’m being told I need a smartphone simcard and my current “web bolt-on” isn’t enough
Some people are being told that but just tell them that you’re going to use WiFi mostly and won’t need the smartphone sim. If they persist just end the call and try again.

Final Tip

Make sure you confirm that this is a one-off purchase, that your contract is unaffected and that the price you’re paying is £285

Discussion

This deal was posted by spottydog on HUKD here. There you can find discussion of the deal, and other peoples experience of what they had to say to get it at this price. Don’t be put off that it says ‘EXPIRED’ in the title, that was just some other persons misunderstanding of the deal.
I’ve ordered one myself so know for definite that it works. I’m on a 12 month O2 Simplicity deal, and only 6 months into my current contract.